Is Brexit on track? | Indirect Tax Matters May 2020

Time and patience are both running scarce with regards to BREXIT negotiations and developments appear to have been further impacted with “COVID”. Notwithstanding same, Michel Barnier has openly accused Britain of wasting precious time and repeated that if the UK wants a deal then there would have to be some reciprocal move on the disputed fisheries stand-off. In response, the UK maintains a deal can be struck but has again warned that talks may collapse in June unless the “common fisheries policy” and the “level playing field” conditions are not taken off the table. The date 30 June 2020 was initially set as the latest date by which UK could seek an extension to the current 31 December 2020 transition period.

Mr Barnier was also extremely critical of UK’s insistence on not seeking an extension when he was recently quoted as saying "the UK cannot refuse to extend the transition period while at the same time slow down discussions on important areas" implying Britain was running down the clock so as to negotiate a “bare bones” trade deal. The last 2 rounds of talks (end April) were cancelled because of the Covid pandemic which now leaves little room for some serious or prolonged negotiations. There are however 2 further rounds of talks scheduled before the 30th June deadline. As a journalist, Mr Johnson was notoriously lax in meeting editor’s deadlines and there is little reason to believe he may have improved on his habitual tardiness.

EU Trade Commissioner Mr Phil Hogan also made known his disappointment at the lack of UK commitment to the Brexit negotiations and firmly declared year-end is now too soon/short to realise any meaningful trade agreement. He suggested also that the UK may not seek an extension and thus blame COVID for all/any ills that may occur post January 2021. He clearly expressed his feelings on the lack of any discernible progress on the Northern Ireland Protocol and the roadmap/plans re implementing measures required therein. His comments were swiftly followed by a similarly exasperated Irish Foreign Minister Mr Coveney who said impasse would hit crisis stage in 2/3 weeks unless progress was obvious. 

Whether or not these heated exchanges were heeded, Mr Johnson only recently acceded to the agreed NI Protocol that there would indeed be customs checks/import declarations for goods crossing EAST-WEST on the Irish Sea (UK to Northern Ireland), a fundamental requirement in the “Backstop”/no border on the island of Ireland. This is to facilitate, manage and control (security) the movement of goods entering the EU given that Northern Ireland will remain within the EU for a minimum 4-year “consent period”. Failure by any EU country to operate such measures would otherwise compromise the integrity of the EU/Single Market border. 

From a domestic perspective (i.e., Ireland’s), Robin Swann, Northern Ireland’s Health Minister, has intimated that “contact tracing” of coronavirus patients on the island of Ireland may be impeded if the UK leaves on 31 Dec 2020 without a trade deal as such requisite data could not be exchanged unless the UK agreed a deal that would also include security and data-sharing arrangements.

Some significant bodies both in UK and EU have cast doubt on the current transition deadline (31 December 2020) and that an extension may be sought but more likely later in year. Vicky Price (Chief Economist/Economics & Business Research London) was recently quoted as saying “The government insists that all is on track, but we all suspect NOT”, while Mr. Kallum Pickering (Economist Berenberg) said “we should not rule an extension out despite the official position….(UK) ministers would likely accept a 6 or 12 month delay given the circumstances”. Chief at Europe and UK Signum Global (a political risk advisory body), Ms Anna Rosenberg has said that the coronavirus crisis had increased the odds of an extension from 20% to 60%.

Given the economic crash and financial cost the Coronovirus has visited upon the world, it’s widely accepted that a global recession will inevitably follow with the EU and UK experiencing its worst ever. In the circumstances it would appear imprudent, impertinent if not impudent for the UK not to seek even a modest extension if the only reason is to save face by NOT seeking same. 

Would the Prime Minister “go” for an extension if the EU were to consider offering one in its own right? Would Mr Johnson be saving face!

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